26/10/2015 Newsnight


The government is defeated on tax credits. What now? Also Ben Bernanke is live in the studio. And should British laws still be transcribed on vellum?

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My Lords they have voted. Content to. Not content 272. Therefore the


content has it. And with that, the Lords said to the


government - we're up for a fight What was an argument over those cuts


could have become a full-on constitutional confrontation,


until the government appeared to David Cameron and I are clear that


this raises constitutional issues that need to be dealt with. However


it has happened and now we must address the consequences of that. I


said I would listen and that is what I intend to do.


Was the Lords right to take a stand, or was it out of order?


And what is left of the government's plan to save money on welfare?


He was the most important man in the world economy, dealing with the


Former Federal Reserve Chairman Ben Bernanake is here with us live.


Why does every British law still have to be written on some of this?


The Lords are either heroes of the people - resisting


the worst excesses of the government as a second chamber should.


Or they're oversized and unelected and trying to thwart


It's not the first time we've heard the argument -


but it turns out the radical left is on the side of the Lords tonight.


What the Lords voted to do was force a delay on the government's


It was a stance of arguable constitutional propriety, but it


I believe we can achieve the same goal of reforming tax credits,


saving the money we need to save to secure our economy whilst at the


same time helping in the transition. That is what I intend to do at the


Autumn Statement and I'm determined to deliver at the lower welfare and


higher wage economy we were elected to deliver at the British people


want to see. The chancellor conceding this


evening that mitigating measures would be taken


in his autumn statement. With me, our political editor


Allegra Stratton and our economics A fairly amazing day. George Osborne


was having a good run. This is the biggest U-turn he ever had to make.


He has been in this post for six years and he is wounded on a number


of levels this evening. Personally, politically wounded. A week ago


people said they were adamant they were not to be shifting. They send


out some heavy hitters to say they would not be shifting but it did not


convince the Lords so he is politically wounded. He is also


strategically wounded, he thought he would get it through both Houses of


Parliament through a statutory instrument. And economically this is


a saving of ?4 billion and if he is softening it in any way we have


defined billions of pounds for the Autumn Statement in one month. And


his rebranding is weakened, he was met to reposition the Tories as the


party of workers. Boris Johnson, his people are cock-a-hoop, thinking it


creates space for them to come through the middle. But whatever


happens in one month, by the end of this Parliament tax credits will be


performed in the way George Osborne would like. And that will be his


legacy in the fullness of time. Just in the public finance terms, 4.4


billion between friends, can he lose that? Well he would rest on what was


called the pasty tax and that was small change compared to ?4.5


billion. The problem is the Chancellor said tonight he will


continue to save money and also mitigate the impact. It is hard to


see how he will do that, hopefully all will be revealed at the Autumn


Statement at the end of November. If your triple checked pensioners and


take money from welfare, there will be losers. We do not know how much


the mitigation would be but even if it was a complete reversal of that


4.5 pounds, it sounds like a lot but the Chancellor Woods still just get


to a surplus at the end of this Parliament. Not by very much but on


current numbers he would still just about hit it. Economic week the


difference between a small surplus and small deficit might matter a lot


politically. Well there are two issues


at play here - tax credit cuts, and the right of the Lords to have


their say on them, or not. Our policy editor Chris Cook spent


the day following the Lords debate. George Osborne announced a big shift


at the July budget. The rabbit in his red box was a rise in the


national minimum wage but offset by deep cuts to tax credits.


The sheer scale of tax credits is subsidising lower wages in a way


that was never intended. So those who oppose any savings to tax


credits will have to explain how on earth they propose to eliminate the


deficit, let alone run a surplus and pay down debt. At the time papers


who had supported the Conservatives at the May election welcomed the


move. Nonu went quite as far as the Daily Mail which canonised the


Chancellor into Saint George. That all seems quite a long time ago.


That Dragon now looks a bit weak. The tax credit cuts will take ?4.4


billion from 3.3 million households. An average of over ?1300 a year. And


the higher minimum wage will not close that gap. Disquiet about the


tax credit proposals has been growing since they were first


announced in summer and today they reached the House of Lords, just


behind the aunt of the picture George and Dragon. Here are


considering five potential puzzles ranging from out wide acceptance of


the plans through to outright rejection. There is a question about


how far the peers can go when dealing with a measure of this kind.


There are two reasons why there has been controversy about the


constitutional edition, regarding the convention of what the House of


Lords can do. A statutory instrument is a small matter that goes through


I much prefer a parliamentary process than ordinary law. It is


presented to both chambers on a take it is presented to both chambers on


Tay it basis. The House of Lords nominally has a veto but does not


use it. And then it was a financial measures and traditionally the House


of Lords does not get involved with financial measures. But we heard


arguments on both sides about what is constitutional or


unconstitutional and it is far from clear cut. In the event most years


took the view that the code after all have a crack at this


legislation. Baroness Hollis and Labour peer, put down one moment. It


delays the desired to ask the government to provide transitional


protection for families who are doing everything we asked of them.


Who trusted the Prime Minister that tax credits would not be cut. And


they trusted Parliament. My Lords when we said we would make work pay.


The Lords passed the proposed amendments including that of


Baroness Hollis. The voted to withhold consent of the cuts until


the government gave protection for a minimum of three years to families


who now receive tax credits. It is not comfortable for George Osborne


being told by unelected peers that you're out of touch with the


question is what he is going to do next. This problem is there are just


no easy fixes on tax credits. There are options such as cutting income


tax or national insurance. Tax credits actually are well targeted


on low income families generally with children, who are in work. And


so any change to the tax system would likely cost more money than


the original tax credit saving. And be less well targeted on families in


greatest need. There is another issue. This is the first majority


Tory government since Labour removed the Conservative hereditary ramp


from the House of Lords. It is always been defeating Labour


government but now with the defeating the Conservative


government for the first time because this is the first


Conservative majority governments since that reform. And the party


does not have a majority in the chamber. So we now have a situation


where the Lords can challenge Conservative government from the


left rather than a Labour government from the right which is quite a


change in British politics and rather uncomfortable for this


government. George Osborne says he is listening on tax credits but we


do not know what he will do. He says the vote has issues that must be


addressed. So a defeat for the government denied for sure but we


just do not know what is to follow. Tonight it was a motion proposed


by Labour's Baroness Hollis that caused this so-called


constitutional crisis. She's just come from her victory


in the Lords and is with us now. And so are two Tories of differing


views about this prickly predicament for the government -


the MP Jacob Rees-Mogg and activist Baroness Hollis, did you have any


qualms at all about the constitution of what you were proposing? No, if


the House of Commons wishes to claim financial privilege, which they are


entirely entitled to do, on for example an amendment to a bill, it


can be overturned in the Commons and the Speaker may give no reason and


simply say we certified as a money issue and that is that. So the


government could have done that, included it in the Welfare Reform


Bill for example. It chose not to get the protection of financial


privilege there. Secondly the government could if it had chosen,


on the other route of financial privilege and put it into a money or


supply finance bill. It did not do that either. So you feel entitled to


have a go at it? Disagree government did not seek or claim financial


privilege. Then when it comes up and says, actually, please assume we


wanted financial privilege. We did not ask for it but give it to us


anyway. Against that a 3 million people facing cuts. Jacob Rees-Mogg


you suggested the government create 100 years to override the Lords


decision. It is an extraordinary rich of the conventions and an


attack on the House of Commons money privilege on ?4.5 billion of


expenditure. Since 1860 this is the third occasion on which the House of


Lords has overturned the Commons on something relating to taxation or


expenditure. In 1868 was the painful duty would be liked, in 1909 it was


the People's budget and now this. The argument on the Commons


privilege on tax and expenditure long predates the creation of


statutory instruments and... Why did the government not choose to do as


Baroness Hollis suggests and introduce this as a financial


measure. Because this House of Lords has never overturned a statutory


instrument relating to money before. It has overturned a small


number, four or five statutory instruments since 1968. They only


came in in 1946. It is rare for the Lords vote down a statutory


instrument and unprecedented for them to vote down one on spending


four point ?4 billion. The government should have done what it


greatly goes and claimed financial privilege. It does it all the time


and it chose not to do it on this. And then afterwards said, please


treated as though we did. This is an attack on the House of Commons and


not on the government. It is the House of Commons Rutledge, the


Democratic ridged to determine taxation and spending. It is a


privilege inherit the subject matter. We have heard that debate.


Are you still proposing the government should create 100 years?


You think it now needs reform? There is a serious problem if the House of


Lords is going to overturn conventions. Up until the removal of


hereditary peers the Conservatives had an in-built majority but they


observed the conventions because they wanted to maintain the House of


Lords and said they were careful about exercising theoretical powers.


It is now a left-wing majority in House of Lords which in six months


of Conservative government has overturned the most important


convention, the taxation and expenditure is the prerogative of


the House of Commons and so the government needs to do something to


govern effectively until 2020. Is there an appetite in the


Conservative Party now to have a constitutional tussle with the House


of Lords? I do not think so. And just a month ago, just after David


Cameron has given his party conference speech, in which he


relaunched the Conservative Party as a 1 nation Conservative Party, to


try to stuff the House of Lords with 100 peers, to enact legislation that


cuts the benefits of the working poor, that is


cuts the benefits of the working for a party that is trying to


present itself as blue-collar friendly. So it would be


constitutionally difficult, but to do it for something that is so


controversial, so officers to where David Cameron says he wants to take


the Conservative Party, I do not think there is a chance in any


rational political sense that the Conservatives would do this. There


is a bit. It is not necessarily the most popular issue on which to


create 100 peers. But if the Lords within six months are willing to


overturn conventions, the government will have further controversial


business to introduce between now and 2020. If Lords are going to


break convention and overturn things that ought to go through smoothly,


the government will have great walk years. -- more peers.


In the President? Now, because they want the privilege, they should


claim it. They want you to behave as though they did. The law is


generally respects a manifesto commitments but unfortunately, this


was not in the manifesto. There was talk of welfare cuts but from my


experience, people did not think that those would be targeting people


in work. They had a false, unrealistic image that it was people


out of work. The government does not have the cover of a manifesto


commitment. David Cameron, as you know, made a public pledge twice


that they would not cut tax credits. But it was more ambitious than that.


The unelected house works properly when it will praise the conventions.


If this is a sign of regular breaches of convention, and the Lib


Dems have said they will not necessarily follow the convention,


then the Lords will need more appears to make sure the government


can get its manifesto through. What will the government to do about


this? George Osborne says there will be something in the Autumn


Statement. What would satisfy you? As a sensible way forward, I would


like to insure that the cuts only affect new claimants. Not existing


families, families who have done what we have asked for and have


built their life around what they are getting from the wage and income


support. Those families need this money. I have been reading letters


and e-mails from people saying, I am terrified when the Christmas letter


comes with the knot of occasion that I will lose ?3000 on a low


income... So new rules on new claimants but the old rules apply


for three years on old claimants? Exactly. Is this a retreat that will


ultimately benefit the government because it was turning out to be a


political headache and it was going to come back to the Commons. Some


said there might be more issues. And now, actually, it has a chance to be


dealt with. There is a difference in interest between George Osborne and


the Conservative Party. It has probably heard George Osborne's


authority. No chance likes to make a U-turn. This could have been very


difficult for the Conservative Party. There was evidence that 71


constituencies, the 71 most marginal Tory MPs, the number of people


affected was greater than the majorities. Of course you have to


cut the deficit but when at the same time you are cutting inheritance tax


for the wealthy, when we have evidence that pensioners are better


off than the average citizen, that they are getting a 2.5% increase in


pensions, when inflation is falling, to make these kinds of cuts


to the working poor, when the Conservative Party is presenting


itself as creating so many jobs, this is a bad position for the


Conservative Party. On the substantive issue, the only thing


worse than the U-turn was to actually do the original plan. It is


difficult. The Chancellor had ?4.5 billion worth of savings lined up


from a budget that had gone from 1 million times -- ?1 billion to ?30


billion. It was an expensive programme and we know that cuts need


to be made to balance the books. Chancellors have to make difficult


decisions. I think conservatives sometimes have to supports


chancellors with the means when they are difficult. Not all decisions and


government are easy. Old chancellors, good chancellors take


difficult decisions and stick to the thrust of them. But targeting the


working poor, was that really what we came into politics to do? The


government has made clear that the package as a whole will make sure


that people benefit. That is not true. I trust the government. You


might think I am naive but when the Chancellor says that the overall


package will insure that nine out of ten people are as well-off... That


is you and I. Eight out of ten is you and I. Its people getting tax


credits. It isn't, it isn't. You are right on that particular point. It


is benefits to help people with children in nursery education and so


on. The Chancellor has to make difficult decisions, and we have to


balance the books. One final question. What did you think you


were doing in the election campaign to put in ?12 billion of welfare


cuts, unspecified. Where were they going to come from? I will let you


into a secret. The Conservatives did not expect to win the general


election. There were promises made that they thought would be traded


away in coalition negotiation. Things like the right to buy for


housing associations. The Tories did not expect to have to make those


cuts. And of course, they are discovering the difficulties. We


will leave it there. It is amazing to reflect on the fact


that in the last few decades, professional economists have had


more power over economic policy than ever before, running independent


central banks around the world. And yet, in no time,


the world was engulfed by the worst economic crisis anyone could


remember - that financial crash One man who was right at the


centre of things was Ben Bernanke, an economist whose specialist


subject was the depression of the 1930s and who ended up in charge


of the US central bank for the great recession of the 2000s,


and who has just written I am honoured to announce that I am


nominating Ben Bernanke to be the next chairman of the Federal


Reserve. His timing could have hardly have


been worse - He got to the post just


in time to get his feet under And what


a storm it turned out to be. Meltdown on the markets as Wall


Street is left reeling from some of the biggest blows in its history.


Perhaps the key moment of the crisis was the collapse


Ben Bernanke had hoped that a rescue might have been orchestrated,


The UK, scared of inheriting Lehman's


Lehman toppled, and with it, confidence in the world's banks.


The next six years of Chairman Bernanke's career was spent


Including putting hundreds of billions of dollars into the US


economy through quantitative easing. What better career


for someone who'd once been a young professor, studying the mistakes


of economic policy in the past? And he hasn't changed a bit in all


those years. Ben Bernanke is with us. Good evening. Could we go to


that Lehman Brothers collapsed moments? I think some US policy


makers, deep down, blame the Brits for stopping Barclays taking over


Lehmans, which would have made an enormous difference. It was a


crushing blow at the time because the British would not allow Barclays


to acquire Lehman Brothers. But a couple of things, I understand why


the Chancellor did not do it. He did not want the bad assets to end up on


the British taxpayers doorstep. And we tried desperately to save Lehman


Brothers. Even if we had saved them, something would have failed


eventually because Congress would not act until they saw the


consequences of a failure. So there would have been a big crisis?


Eventually, I am afraid, yes. Your political journey comes off in the


-- comes across in the book, you start off as a small government


Republican and become persuaded that there is a role for government. You


talk about having to stop people buying certain products like


inflammable pyjamas for children. And I don't think you had the view


at the beginning, you thought there would be more personal


responsibility. Tell us about that journey. I always took a moderate


position. I think the market is critical for a good economy but the


government has a role to play. I think the party left me because the


tea party and the extremes of left and right left me in the middle, and


many other Americans, I think, who would like a more balanced approach.


Unfortunately that is not worry are right now. Who would you vote for in


the next election? I don't know what I am registered. I did not vote as a


matter of principle when I was chairman. Those on the left look


back at the last 30 years of the neoliberal consensus, neoliberal


economics, and they see that as an ideological stands, that the world


took, after Thatcher and Reagan. Are they right to see it as


ideologically or is that just technocrats doing their best for the


world? I think in the case of the financial system, there was too much


deregulation. The regular system was put together in the 30s during the


great depression and it did not keep up with what happened, the


innovations and change, and so when the crisis came, we did not have the


tools and the vision. We could not see what was going on. I am not sure


I would indict the philosophical approach. I think we need good


regulation and that is what is happening now. What about austerity?


In the book and in subsequent interviews, you have criticised


governments for pushing too hard on the fiscal retrenchment, leaving a


lot of pressure on you guys doing the monetary policy to put your feet


on the accelerator while the government is putting their feet on


the brakes. Was that ideologically? It was very practical. I think too


much burden has been put on central banks to carry the recovery. The


fiscal policy has focused too much on short-term cuts and austerity. I


think when you have millions of unemployed, it is not the time to be


making sharp cuts, to be doing sequester us and fiscal clefs and


all the things that have happened in the Congress. What about the -- what


about Europe and the UK? I think it depends on the circumstances. Greece


is not going to do fiscal expansion but a country like Germany has scope


to do that. And the UK, I am not an expert but I think the UK was


somewhere between the Europeans and the US and it has had a decent


recovery, as you know. The UK fiscal stands is coming to a neutral


position. It was a little tight early on and perhaps they could have


done better. I asking because we have this charter for budget


responsibility which will mandate a budget surplus under normal


circumstances. Would you consider that fiscally responsible or


irresponsible, making the life of central bankers harder? It depends.


If you are in a recession and the period of high unemployment, I think


you need to be prepared to have a deficit in those situations, and


understand that in periods of rapid growth, you will concentrate on


that. I would not want to do that all the time. But do you want a law


that says you have to have a surplus except under predefined


circumstances? I think that you want to have the flexibility to respond


to national emergencies. In particular response to recession


is, like a deep one we have just come out of. Looking back at the


crisis, clearly the public were left quite angry, with the sense that


they picked up the bills and other people got away with it. Bluntly, do


you think more bankers should have been put in jail? I think the


Department of Justice's strategy could be more focused on individual


responsibility. They find the big institutions billions of dollars.


What was the individual responsibility? I don't think we


know the answer. Because we didn't bother to look. That was my concern.


Let's talk about the policy regime. If you were writing a note, you were


going to write it on vellum and bury it. If it was a letter to


policymakers in 60 years' time, giving them the benefit of your


advice, having been through this crisis, what would the pithy single


piece of advice be? I think when the situation is looking benign, that is


when the risk is building, so be vigilant. And that was the story of


the precrisis power-down? That was what happened. And how do we get out


of the paradox? Vigilance. If we look carefully and pay enough


attention, then we can withstand the shocks. But you are great land of --


a great fan of inflation targeting. We were looking for inflation but we


did not have it. Meanwhile, a wolf came in the back and did a great


deal of damage to financial stability. Do you concede that you


need a financial instability remit in monetary policy as well as an


inflationary policy? With the central bank -- the central bank,


the Fed has extensive resources to monitoring -- devoted to monitoring


for problems. Monetary policy does not have to do everything. I think


regulation, supervision, oversight, macro credential policies, those are


the first line is that we should take. And how we rectify these


problems? We will never do that completely but we have made


progress. Ben Bernanke, thank you. How should teachers deal with pupils


whose behaviour is out of control? They are allowed to use force


as a last resort, but unions have told Newsnight that an increasing


number of their members are worried if they do so - even in quite


legitimate circumstances - they Secunder Kermani spoke to one


headteacher who nearly lost For these children this classroom is


their last chance of staying within the school system. Social and


emotional difficulties mean other schools have not been able to handle


them. It also means that at times dealing with them can be


challenging. This is how teachers in both special


education and mainstream schools are taught to physically restrain


pupils. It is always meant to be a last resort, never a punishment. The


need to protect the child and others around them. But of course it is


controversial and can have serious consequences for the child and for


the teacher. Trystan Williams had won awards as a


headteacher dealing with challenging pupils at mainstream schools. Two


years ago he tried to help avoid who was at risk of seriously harming


himself. And it almost cost him his career. I attempted to lift the


young man up. In the process of trying to lift him off the floor he


pulled me down on top of them and sustained an injury. I was alone


with the child and under the circumstances sadly, the external


agencies felt I had a sort of the young man. I just thought I had


winded him, I had no idea of the catastrophic events that were going


to happen. Trystan Williams was suspended and subject to a police


investigation. After 12 months he was cleared and returned to work in


another school. To have that taken away from you for simply trying to


do your best, it actually drove me to consider... Whether I should


still be here. You know. And when that happens, you think I have


sacrificed a lot for transforming lives and this is the way I get


treated for trying to do my best. That is difficult to come to terms


with. Then when my wife, obviously she needed support and my boys are


having psychiatric counselling and help. Because they could not sleep


at night and did not want to go to bed in case daddy got locked up.


That was hard working. Trystan Williams's case is extreme but not


the only one. We have heard of other examples of investigations going on


for months before teachers are eventually cleared. At times some


have even been driven out of the profession. We are dealing with a


couple of cases per month on average that has come to a difficult


situation where someone has been suspended or faces some kind of


challenge as the result of that. That hides many more were decisions


had not been made upon public and were perhaps children who should


have been restrained have not been restrained because professionals are


not certain as to their powers and rights. The Department for Education


guidance states teachers should not be suspended automatically when a


complaint is made. And that 90% of investigations should be completed


within three months. Unions believe that is not happening. The last time


the Department for Education counted, 74% of cases concluded


within the time. They do not have up-to-date figures but advise


schools that cases should be swiftly investigated. Allegations of misuse


of restraints are serious. In August the school in Devon was closed down


as police examined claims that staff used excessive force on pupils. And


this is footage of primary pupils in Tottenham being restrained last


year. The school and council reviewed safeguarding procedures and


Ofsted cleared them of wrongdoing but some parents were furious. How


often are you in scenarios where a restraint is one of the options?


Teachers at the school managed to dramatically reduce the number of


restraints they use by concentrating more on de-escalation. September it


49 times, the September just one time. But the knowledge that


restraining a pupil could end their career is a constant concern. I was


suspended for eight months. After two weeks the police had


investigated and cleared me. But you go through the emotional stresses


and strains of waiting for governors to confirm the decision that you can


come back to school, come back to work. You're not necessarily given


the protection that we deserve as professionals. Nobody wants to do


it. It is dreadful for them, horrendous for us and at the end of


it you over analyse everything constantly. What could I have done,


could I have done that differently. It is a horrible situation to be in


but at times it is necessary. Bernard Allen helps to train


teachers and acts as an expert witness. He says there needs to be


more consistency on how guidelines on the straights are set out. It is


better management and supervision required to stop the bad people


abusing the powers. But the moment it is decided in different areas of


the country by different individuals. What is good actors in


Dorset is considered abuse interim and that is the situation we have


had for 25 years. Trystan Williams and that is the situation we have


is now headteacher at another school but worries that what happened to


him could still happen to other professionals. That could happen to


anybody in a school similar to mine. Wrong place, wrong time. Complex


situation, trying to do the best. And your life will never be the same


again. Trystan Williams ending that report


by Secunder Kermani. We started on tax credit cuts -


let's finish with another idea A committee of MPs has suggested


that ?80,000 could be saved if acts of parliament were no


longer printed on vellum made At the moment,


the practice is to print two such copies of each act, one


for the National Archive and one for A key feature


of vellum is its longevity. Replace vellum with paper -


even the most expensive, thick kind of paper that you buy


at the poshest of stationery shops Well, we have some vellum now,


live in the studio. I'm with Paul Wright who runs


the last surviving vellum works Good evening. How does this get


turned into a piece of act of Parliament, for example M if we go


back to the start, one of the supermarkets put in an order for


beefburgers and we going and take a by-product. Not killing animals for


this? It is just going in the bin. Then we go into this 1000 -year-old


process of soaking it, getting the skin to the and then setting to with


this what is called a lunar. Literally we shave and scrape. You


do not do this by hand M everything is done by hand. We have no machines


to do it. It takes about seven years. And this is why it costs ?14


for a sheet. It was but into that ?14, what do we get for that? You


get about 5000 years of secure data storage. The world... It sounds like


a long time. Looking at the dead Sea Scrolls, found in the back of a


cave, 2400 years after they had been written. They were stumbled across.


That is a long time. Can find no reduce something that can do better


than this? Sadly for silent -- the science and gladly for me, they


cannot. We got involved with a project in 2000 and people wanted to


bury data for 1000 years and went all round all the technology


companies in the world saying, convince us that in the year 3000,


we can recover this data and it will be good. Who do you sell it to,


apart from the records office? It goes to calligraphers, illuminators,


botanical artists, hobbyists. It goes all over the world. We are


considered the finest in the world. What to use to write on it? Cast


your mind back to the Bronze Age, if they managed to do it with a bit of


Bernard Twigg, everything forward of that works. If you want to do it


with a Biro, that will work fine. If you want longevity it is the ink


that becomes the limiting factor. If you take an archival ink and applied


to this than I could give you a piece today and you could write and


it would be round in a thousand years. Could I print a photograph of


my other half on this cruel printer in my lounge? Absolutely. So there


is a market, people would love something that costs ?14. We do do


things, we have printed best man speech is, specialist speeches from


father to daughter, all kinds of things. Good luck with the business,


that is really interesting. It has been a pleasure.


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